Regulators, utilities spar over federal tax cut savings

COLUMBUS, Ohio (AP) — Ohio’s four big electric utilities joined forces this month to challenge a request by state regulators to return proceeds from the federal tax cut to customers by reducing rates.

The Public Utilities Commission of Ohio in January instructed American Electric Power, Dayton Power & Light, Duke Energy and FirstEnergy to treat any tax savings received after Jan. 1, 2018, as potential consumer savings.

The commission ordered the companies to begin tracking how much they are over-collecting when using delivery rates developed under the previous 35-percent federal tax rate, rather than using the new 21-percent rate.

The companies pushed back in an unusual joint filing Feb. 9. They argued that the PUCO’s order lacks specifics, potentially violates a rule against retroactive utility refunds and falls outside the normal rate-making process.

“This is a significant and complex undertaking, and the (companies) urge the commission to methodically pursue the task in a thorough manner using a process that is fair and deliberate for each utility,” the companies said in the filing.

The PUCO is accepting responses in the case through Wednesday.

President Donald Trump signed a $1.5 trillion tax cut package into law in December that provides generous tax cuts for corporations, including the utilities, but more modest reductions for middle- and low-income individuals and families.

The law’s corporate tax rate reduction affects regulated utilities because taxes are an expense that the companies pass along to consumers. If taxes go down, PUCO argues, the reimbursement for the expense also should be reduced.

Faced with the utilities’ objections, the Ohio Consumers’ Counsel, the lawyer for ratepayers, urged the commission to immediately launch a formal investigation into whether the utility rates figured off the old tax rate are now “unreasonable.” The office argued such an investigation is allowed under the law.

“Our view is that utility consumers should see reduced charges from the federal corporate tax cuts, and sooner rather than later,” Ohio Consumers’ Counsel Bruce Weston said in a statement.

The Ohio electric companies wrote, “There is little doubt that retail customers will realize benefits from tax reform through retail utility rates” — though each laid out separate concerns over the commission’s order in a separate filing.

FirstEnergy argued that, by law, PUCO cannot order the utility to immediately reduce rates because the company’s latest PUCO-approved rate plan froze the company’s base rates at current levels through May 31, 2024. FirstEnergy’s base rate has been the same since 2009, the company wrote, adding that the freeze had been good for customers and that the company does not intend to raise rates through the middle of 2024.

AEP Ohio stressed the complexity of tax law and argued that the federal tax cut will affect each utility in slightly different ways and that reductions in so-called “rate riders” utilities have been using as add-ons to base rates must be made in the context of a full-blown rate case.

AEP Vice president Marc Reitter said, “We want to ensure that the effort to address this issue is done in a fair and deliberate manner that complies with Ohio law so our customers can realize the benefits of tax reform.”

Dayton Power & Light argued that it already is failing to achieve a reasonable rate of return and needs to increase rates by some $55 million to do so.